If you were able to use the Control Room on 7.0.3 then I assume the Preference Folder just got corrupted during update. That happens sometimes...

Close down Cubase and simply remove Cubase's Preference folder to another place (like the Desktop) and restart. Cubase will then rebuild the folder as a 'factory fresh folder' which means you have to select your interface driver etc. again, but hopefully it will solve your issue.

Could you define "stop working" a bit better please?
Does it all lock up, do you seem to have a working rig but no audio output? Meters working or frozen? Ditto transport....
the more details the easier to help.

Does it happens on all your projects?
Most probable deleting the preferences will solve the problem.
Have you checked on the VST Connections? (Devices > VST Connections) That the Control Room is actually activated and your audio buses are properly routed?

could you explain to the fine folks here at GS how the prefs get hosed up every time Cubase gets an update? Curious as to why this is the solution all the time.

That is a very good question, to be honest, I am not 100% sure, you don't have to delete the preferences all the time, and actually in most cases you do not need to delete the whole content of the preferences folder.
It actually depends on what the issue is; E.g. If some of your plug-ins are not being loaded, probably you should only have to delete the vst2xblacklist.xml file.

Some times it is just simpler and easier to delete the whole folder than search for the file that is causing the problem.

If you have installed a major upgrade (E.g. Cubase 6 to Cubase 7) Cubase 7 will import the Cubase 6 preferences which obviously can cause issues do to the changes on some features or behaviours of the new software.
That is why we also recommend to delete the preferences of both versions.

I will ask the developers and see if I can get you a more detailed answer about this

Another set of plugin related files that can cause issues (although this one is not down to anybody as a fault) are these:
C:/Users/<username>/AppData/Roaming/Steinberg/<CubendoX>/VstPlugInfo v2.XML
C:/Users/<username>/AppData/Roaming/Steinberg/<CubendoX>/Vst2xPlugins.XML

(you will have one or the other of these, depending on version of Cubendo installed - the v2 file is for C7/N6, the other is for earlier versions).
Deleting this will force a rescan of all 3rd party plugins installed except those on the blacklist. This seems extreme, but can be very helpful if you use Waves Mercury, where they are continually updating/improving etc and a rescan will eliminate all references to plugins that are no longer there.

Defaults.XML is another file that can get corrupted.

This is just my opinion, but I think that what sometimes happens if you allow settings from earlier versions to be ported causes conflicts. For this reason, I usually make sure that a new installation cannot see older settings. The easiest way to do this is to create a folder in C:/Users/<username>/AppData/Roaming/Steinberg/<CubendoX>/ called "Backup settings" or something, and move every earlier version's settings into this - just drag the folders into it. A new install will no longer see them and will build a brand new set of default prefs and then you can simply move the old ones back again. (this obviously only works with an installation of say C7 where you previously had C6.5 or similar)